Pakistan Economy - News & Updates - Archive

[Neo]

SCRAs: Singapore balances exceed $100.5 million


KARACHI (October 06 2006): After re-emerging as lead investor on October 3, Singapore continued consolidating its position under Special Convertible Rupee Accounts (SCRAs), where its balances exceeded $100.5 million on October 4. In the meanwhile, USA's balances also rose by $1.8 million to $26.7 million on October 4.

Small increases in balances of Hong Kong and Switzerland were also noted. Hong Kong's positive balances improved by another $0.05 million to reach $0.12 million on October 4, while Switzerland's minus balances further improved and stood at $19 million on October 4, indicating fresh investment of $0.2 million as on that date.

The above-mentioned positive inflows were partly offset by dis-investments initiated by UK and Qatar. Accordingly, UK's balances declined marginally to $71.2 million compared with $71.8 million on October 3, while Qatar's existing negative balances deteriorated to minus $0.041 million compared with $0.04 million on October 3. All in all, the overall balances of all countries under SCRAs rose to $174.3 million on October 4, an increase of $3.3 million over their level on October 3.

In the meanwhile, the benchmark KSE-100 index showed a gain of 150.83 points to close at 10743.55 points on October 4. The KSE-30 index also gained 132.36 points to close at 13279.84 level. The BRIndex30 scored a positive change of 83.62 points to close at 11,496.21 points.

The gains exhibited by the indices were attributed to (a) investors covering of positions in oil and banking sectors at the prevailing lower levels after a day old correction, (b) the news of discovery of some new oil and gas reserves by OGDCL in the north-west, and (c) the news that Pakistan is considering floating GDRs of shares of three major banks, including HBL, UBL and NBP besides the oil and gas giant OGDCL.

 

[Neo]

KDLB to be closed down by December


KARACHI (October 06 2006): The federal government has decided to close down the Karachi Dock Labour Board (KDLB) by December this year as part of its landlord port strategy and under the National Trade Corridor (NTC) programme. The closure of KDLB would cost around Rs 4.2 billion ($70 million) to the national exchequer.

In this regard, the Prime Minister gave the formal approval for the KDLB closure in July and a consensus on the issue was developed for its closure through Voluntarily Separation Scheme (VSS) option.

The federal government has assigned the ports & shipping ministry to look into this "very important" matter and settle issues relating to the KDLB peacefully.

The government has chalked out a comprehensive plan for ports improvement and modernisation to reduce dwell time for cargo at lower charges. Efficient ports can save $457 million annually to the national kitty.

The World Bank in its report suggested, in case of closure the KDLB would have to pay about Rs one million to each employee. There are about 3895 employees and officers on its payroll. Of which about 3673 are dock workers; 185 staff members; and 37 are officers. The total payoffs calculated by the bank would be around Rs 4.2 billion.

This would be equivalent to a minimum of seven years salary and is considered to be extremely generous as per international standards (for example the United Kingdom dock workers received a maximum of about 15 months salary).

It would have to be available as lump sum amount, enabling those who wish to set up other businesses to do so.

The federal government has decided to close down the KDLB by December this year after developing consensus with workers and the management as part of its landlord port strategy (LPS) and under the National Trade Corridor (NTC) programme, but was unable to formulate mutually agreed separation scheme.

The LPS concept was adopted in early 1990s that envisages the role of the port authority as a facilitator for investment in the private sector to operate various port-handling facilities. Sources told Business Recorder three possible options are under consideration for generating financial resources for the closure of KDLB.

Firstly, the continuation of the 'KDLB cess' for the next three years to repay a bank or from another loan, eg, from the Karachi Port Trust (KPT) surplus account, which would be used to pay the lump sum now with future 'cess' payments as security.

This would not be an unacceptable burden in practice, as the cess would have to be paid if the KDLB were retained. Secondly, sale of the KDLB property and the third option is the government funding, or alternatively, a loan from the World Bank or a commercial bank.

The World Bank, being a possible source of funds, has an extensive track record of assisting with sensitive labour reductions, eg, in coal mining in Russia.

The World Bank could also assist with a social audit of the likely consequences of closing the KDLB and make provision for worker counselling, retaining and other social safety net measures. The cargo handling companies to be operated by the private sector would replace the KDLB after its closer.

There are no major problems with the terminal operators' own labour. The problems are caused by the KDLB, whose registered dockers the terminal operators are obliged to employ and subsidise. The original aim of the KDLB when it was set up in 1973 was reasonable, like similar schemes in other countries.

The Karachi Dock Workers Scheme (Regulation of Employment) was promulgated through an ordinance in 1973, which was eventually passed as an act in 1974.

The KDLB was established to provide regular work and income for dock workers, who had previously been employed on a casual basis.

IN PRACTICE, HOWEVER, THE SCHEME STARTED BADLY AND IT HAS BECOME MORE UNSATISFACTORY OVER THE TIME. ITS MAIN DEFICIENCIES WERE:

-- It was overstaffed from the start. When the KDLB opened in 1973, about 8,598 dockers reported for registration. This was more than had been expected and almost twice the requirement.

-- The dockers (dock workers) were guaranteed an employment at a time when containerisation and other forms of mechanical handling were reducing the need for manual workers.

-- The reduction of KDLB via natural wastage was slowed by the introduction in 1987 of the hereditary right of a son to replace a retiring dock worker (phased out in 2000).

-- The wages for the dock workers rose to levels several times higher than those for workers in comparable work elsewhere in Karachi and the cost if medical and other benefits for relatives as well as dockers are included have increased steadily.

-- The KDLB staff receives further payments under an incentive scheme. These were based on very low, outdated "norms" for cargo handling, which resulted in the dock workers getting bonuses even if handling speed is very low.

-- The registered dock workers, however, do little work on quays. In fact, they were trained mainly for outdated general cargo, break-bulk operations, while two thirds of the Karachi's dry cargo is containerised. The port operators, however, were obliged to employ the KDLB gangs and to pay for them essentially to watch the operations. The general consensus within the port is that the KDLB staff are neither needed nor wanted.

-- Worse, the manning levels for KDLB gangs are several times as high as would be necessary, even if they worked (eg, KDLB container gangs consists of 24 men while only four to six dock labourers were needed). They were based on outdated productivity norms.

MAIN EFFECTS OF THE KDLB ON EFFICIENCY AND COST AT THE KARACHI PORT CAN BE SUMMARISED AS:

I) The KDLB does not detract significantly from port productivity, because its members do not participate greatly in the work.

II) The KDLB adds significantly to the cost. Firstly, the cargo handling companies are obliged to employ the unnecessary KDLB gangs and in most cases, pay unnecessary incentive payments. Secondly, the cargo handling companies have to pay a 'cess' (ie, a levy) to provide minimum salaries for KDLB staff when they are not "working" and medical as well as other benefits.

III) The KDLB impairs the competition between the KPT and Port Qasim Authority (PQA) as the PQA does not have a Dock Labour Board (DLB).

 

[Neo]

ADB may approve $40 million loan for BRDP II


ISLAMABAD (October 06 2006): The Asian Development Bank (ADB) is likely to approve 40 million dollar concessional loan next month for 'Bahawalpur Rural Development Project phase-II' (BRDP)' aimed at augmenting income generation activities in the region.

Official sources told Business Recorder on Thursday that the proposed project that would be executed in three districts Bahawalnagar, Bahawalpur and Rahim Yar Khan would focus on reducing poverty by providing backward rural areas with basic infrastructure, such as roads and electricity and promoting community-based social and economic activities.

Phase-I of Bahawalpur Rural Development Project (BRDP) loan of 38 million dollar was approved on September 26, 1996. It has successfully addressed lack of rural infrastructures (roads, irrigation, electrification, etc,) and promotion of social mobilisation for community-based development in this poverty-ridden area.

In total, 600 kilometers (km) of rural roads will be improved (492 km has been completed to date), 475 villages will be electrified (391 to date), 684 watercourses have been improved, and 560 community organisations, including 192 women's organisations, have been mobilised for income-generating activities or infrastructure construction and operation.

Based on notable achievements of the BRDP and existence of remaining vast underdeveloped rural areas, the government requested the ADB to provide further assistance to finance follow-on second phase, sources said.

The Punjab government initiated preparatory works for a second-phase project in early 2005 and is carrying out its own feasibility study. To support the Punjab government in preparing the loan project, ADB Management also cleared and approved a project preparatory technical assistance (TA) of 0.3 million dollar in September 2005.

The 40 million dollar loan will focus on three components: improvement of core rural infrastructure, promotion of community-based economic and social activities and small-scale infrastructure development, roads and electrification of villages.

The second component will include community mobilisation, capacity-building for enhancing skills, non-formal literacy programme for women, and provision of matching seed investment for income-generating activities, and small-scale infrastructure projects, such as brick pavement of small roads and minor water supply and sewerage facilities.

The third component will include project management and capacity building of district authorities for planning, implementation and operation and maintenance of rural infrastructure including others such as veterinary services. Sources said Bahawalpur division consists of three districts - Bahawalpur, Bahawalnagar, and Rahim Yar Khan which are categorised as "high deprivation area" in the Punjab Poverty Reduction Strategy paper, 2003.

Many socio-economic indicators of the area such as literacy ratio, road length per area, village electrification rate, telephone connection rate, rate of population with safe water supply, etc, are below provincial averages. The region constitutes the cotton-wheat zone, which has the highest poverty incidence: as high as 56 percent among other agro-climatic zones in Pakistan.

 

[Neo]

'Country to be made tourist-friendly'

ISLAMABAD (October 06 2006): Federal Minister for Tourism Nilofar Bakhtiar on Thursday said the government understood the importance of tourism and was focusing on to make the country a 'Tourist-friendly'. She said, 'Visa on arrival policy' had been approved and it was on the implementation stage, which would be run through recognised tour operators.

Nilofar Bakhtiar said, the Indian visa regarding religious tourism had been extended from five days to 15 days and normal visa for any Indian tourist had been extended from 15 days to 30 days, adding it was on reciprocal basis.

She said, visa-friendly policy of the government would not only generate income but also promote the image of the country, adding they had also established a very aggressive marketing strategy.

In the first phase for promotion of tourism we have selected some countries for the marketing purpose, she said, adding some products from Moenjodaro and Texila would be marketed to those countries.

She said, Gandhara civilisation would be marketed in Japan and for this purpose all the materials were translated in Japanese language. A website of tourism was on final stages, she added.

Nilofar Bakhtiar said, workshop on tourism generated many ideas and a resolution was passed, adding nazims would work together with the Ministry of Tourism for the promotion of tourism in the country. She said: "We have to package, manage the image and market it to the world as we have the natural beauty, a rich culture, vibrant heritage and a long history".

 

[Neo]

Friday, October 06, 2006javascript:; http://www.dailytimes.com.pk/print.asp?page=2006\10\06\story_6-10-2006_pg5_6
Pakistan set to become IT, telecom regional hub: Aziz

ISLAMABAD: Prime Minister Shaukat Aziz said that Pakistan is geared to become the regional hub of information technology (IT) and telecom business in view of the availability of highly skilled human capital, ease and reduced cost of doing business and its world-class infrastructure.

Talking to Fredrik Baksaas, President and CEO of Telenor Norway at the PM House on Thursday, the Prime Minister said deregulation, privatization policy and opening up of telecommunication sector has stimulated phenomenal growth, attracted foreign investments and telecom sector today is the fastest growing sector of our economy.

Fredrik Baksaas said that Pakistan has all the features of becoming a success story in view of the comparative and competitive advantages of doing business in Pakistan. Fredrik Baksaas also said that there is a direct relationship between the teledensity growth and the GDP growth of the country. Research shows that there is an increase of one percent in the GDP with 10 percent increase in teledensity. He said according to GSMA Association research, the contribution of telecom sector in the overall GDP growth of Pakistan is 4 per cent.

The prime minister told that mobile sector has shown growth of over 100 per cent in last two years. This, coupled with the incentives provided to the Information and Communication Technologies (ICT) sector, has created an enormous range of opportunities for all segments of the industry.

The prime minister said the combined teledensity during last three years has increased from 4.5 per cent to more than 27 per cent and the number of subscribers of fixed and mobile telephony has increased from 8 million in 2003 to 42.7 million in 2006. Mobile subscribers alone are in excess of 36 million, the prime minister said.

The prime minister also told that the use of cellular phones among the low-income subscribers is growing in the country. In rural areas the government is providing the facility of phones through the system of wireless local loop. Fredrik Baksaas apprised the prime minister of the plans of Telenor to expand its business in Pakistan and said that in view of the favorable policy framework of Pakistan, Telenor is working on a long-term plan to establish their business in Pakistan.

 

[Neo]

Friday, October 06, 2006javascript:; http://www.dailytimes.com.pk/print.asp?page=2006\10\06\story_6-10-2006_pg5_9
Romanian help sought to utilise coal resources

ISLAMABAD: Pakistan has sought Romanian assistance to help the government exploit the coal resources. Pakistan is the second largest country having coal reserves of 185 billion tonnes.

Federal Minister for Petroleum and Natural Resources Amanullah Khan Jadoon, sought the help while talking to Charge d’ Affaires Romanian Embassy Mircca Hurmuz who called on the minister on Thursday, according to an official statement.

There exists a lot of potential and opportunities for promoting Pak-Romania cooperation in the hydrocarbon and mineral sectors for mutual advantage and they discussed matters of mutual interest.

Mr Jadoon said that a package of attractive incentives was being offered to the investors in the onshore and offshore oil and gas exploration and the Romanian companies can take part in these activities individually or by establishing joint ventures. He said that Romania could help Pakistan exploit the coal resources.

The Charge d’ Affaires said that there was tremendous scope for both countries to enhance mutual cooperation in oil, gas and mineral resources for mutual advantage.

 

[Neo]

Friday, October 06, 2006javascript:; http://www.dailytimes.com.pk/print.asp?page=2006\10\06\story_6-10-2006_pg11_1
UK pledges £90 million to maternal and child health in Pakistan
Maternal deaths 120 times more likely in Pakistan than in the UK

ISLAMABAD: The UK has committed £90 million to help address the tragedy that every year 25,000 to 30,000 women in Pakistan die from complications of pregnancy and childbirth, and 160,000 babies die in their first month of life.

Gareth Thomas, UK minister for international development, made the announcement following a meeting in Islamabad with Prime Minister Shaukat Aziz. This is his third visit to Pakistan.

The money will be the UK’s contribution to Pakistan’s National Maternal, Newborn, and Child Health (MNCH) policy and strategic framework. The UK will be funding more than one third of the entire programme.

“The political leadership is committed to improving the social sector in Pakistan and has increased the Public Sector Development Programme (PSDP) allocation, especially in the health and education sectors. The prime minister has already approved the programme for the next five years and now it will be placed before the Central Working Development Party (CWDP) for final approval in its next meeting on October 21,” the minister said.

He said that women of reproductive age and their children, especially the poorest, would benefit most from the programme. “Between 2006 and 2011 the programme will save the lives of at least 30,000 women and 100,000 babies. These improvements will transform health and quality of life of 10 million families across the whole of Pakistan, and will also avert deaths and ill health well beyond 2011,” he said.

Thomas, who is visiting Pakistan ahead of the one-year commemoration of the earthquake of October 2005, said, “A woman in Pakistan is 120 times more likely to die a maternal death than a woman in the UK. For poor women the risk is even higher. The UK is contributing to this new Pakistan-led initiative to train more community-based midwives, provide better family planning services and have skilled staff in all district hospitals who can safely deliver babies on an emergency babies. The programme will also help women and their families improve their knowledge and take healthy action for a safe pregnancy.”

“The people of UK, especially of my constituency who mainly belong to Pakistan are very happy in extending this help to Pakistan. We hope that this programme will be tremendous success,” Thomas said.

The UK’s contribution will mainly be spent in the UK Department for International Development’s focal provinces of Punjab and North West Frontier Province. The success of the MNCH programme is dependant upon the government of Pakistan committing at least half the overall £245 million (Rs 27 billion) cost of the initiative.

 

[Neo]

Exchange cos may handle Hajj remittances

KARACHI: State Bank of Pakistan on Thursday allowed commercial banks and exchange companies to handle remittances for Saudi Arabia by Hajj Group Organisers (HGO), for Hajj in December 2006.

Exchange Policy Department of central bank by issuing circular letter number 17 and 18 of 2006 allowed the handling of remittances by HGOs both to commercial banks and foreign exchange companies.

The SBP said the HGOs must be enlisted with Ministry of Religious Affairs and “remittances shall be on account of accommodation and the compulsory Hajj dues to concerned Saudi Arabian agencies.”

The banks and the exchange companies will effect the Hajj-2006 remittances as per the amounts or percentage of packages advised by the Ministry of Hajj to each HGO.

The banks and exchange companies will have to verify the following documents.

Letter in original from ministry of religious affairs must be presented by HGO to banks and exchange companies showing enlistment as HGO and allocation of the seats and the amount or percentage of foreign exchange to be remitted to Saudi Arabia.

The banks and exchange companies would also verify list of Hajjis along with copies of relevant pages of hajj passport that is first two pages and page bearing visa and copy of air ticket to be obtained before scheduled departure dates.

Banks and exchange companies for inspection purpose must retain the copies of above-mentioned documents. The banks and exchange companies will ensure that “no remittance is affected after the first Ziqa’ad, 2006.”

 

[Neo]

Swiss business delegation to make full use of market potential in Pakistan

ISLAMABAD: Swiss corporate business delegation impressed by the business and investment package offered by the government of Pakistan has showed its keen interest for making full use of market potential in Pakistan.

State Minister for Finance Omar Ayub Khan while stating this said that the delegation is interested in investing in Pakistan and establishing business relations with the country.

The Minister informed them about the various measures, which were taken by the Government of Pakistan for the foreign investors. The Minister said that Pakistan was a profitable country for foreign investors and assured that the government would remove any bottleneck if faced by investors in Pakistan.

Earlier, the Swiss delegation comprising Paul Louzado, Sales and Marketing Director SIG Combibloc Okeikan, Bernd Mirshle, Head of Corporate Business SIG Combibloc Okeikan, Kashif Bashir Sheikh, Country Manager, SIG Combibloc Okeikan and Norbert Hoffmann Chief Operating Officer, SIG Combibloc called on State Minister for Finance Omar Ayub Khan.

They said that growth in Pakistan was demand led which was an indicator the standard of living and prosperity of the people of the Pakistan was raising as a result of the government?s efforts. They also praised the professionalism and positive attitude of the Pakistani companies and workers. The company specializes in providing packaging solutions for liquid consumable products liked milk, juices etc.

 

[Neo]

Friday, October 06, 2006
Romanian help sought to utilise coal resources

ISLAMABAD: Pakistan has sought Romanian assistance to help the government exploit the coal resources. Pakistan is the second largest country having coal reserves of 185 billion tonnes.

Federal Minister for Petroleum and Natural Resources Amanullah Khan Jadoon, sought the help while talking to Charge d’ Affaires Romanian Embassy Mircca Hurmuz who called on the minister on Thursday, according to an official statement.

There exists a lot of potential and opportunities for promoting Pak-Romania cooperation in the hydrocarbon and mineral sectors for mutual advantage and they discussed matters of mutual interest.

Mr Jadoon said that a package of attractive incentives was being offered to the investors in the onshore and offshore oil and gas exploration and the Romanian companies can take part in these activities individually or by establishing joint ventures. He said that Romania could help Pakistan exploit the coal resources.

The Charge d’ Affaires said that there was tremendous scope for both countries to enhance mutual cooperation in oil, gas and mineral resources for mutual advantage.

Potential for promoting Pak-Romania ties in hydrocarbon, mineral sectors exist: Jadoon

ISLAMABAD: Federal Minister for Petroleum and Natural Resources Amanullah Khan Jadoon has said that there exist a lot of potential and opportunities for promoting Pak-Romania in the hydrocarbon and mineral sectors for the mutual advantage.


He said this while talking to the Charge d? Affairs of Romania Mircea Hurmuz who paid a courtesy call on him here on Thursday and discussed matters of mutual interest and bilateral cooperation.

During the meeting the Minister said that Government was according top priority to the speedy promotion of energy sector and briefed him about the development activities in the oil, gas and minerals.

He said that a package of attractive incentives was being offered to the investors in the offshore and onshore oil and gas exploration and Romanian companies can take part in these activities individually or by joint ventures.
Jadoon recalled the Romanian cooperation in setting up of National Refinery in Karachi and said that both countries could benefit from each other?s experience in these vital fields.

The Minister said that Pakistan is the second largest country in the world having coal reserves of 185 billion tones that the government was trying to increase 50 per cent share in the energy mix. Romanian can help us in exploiting the coal resources, he maintained.

The charge d? Affairs of Romanian agreed that existed a tremendous scope of both countries cooperation in oil, gas ad mineral for the mutual advantage. Secretary Petroleum and Natural Resources Ahmad Waqar and DG were also present during the meeting.

 

[Neo]

$226 million offered in Karachi public transport

KARACHI: October 06, 2006: The Kenhill Private Limited has offered to invest 200 million euros in Karachi public transport and said the company in co-operation with Holland Bus Private Ltd is interested in plying 1500 comfortable buses during the next 2 years.

Company's CEO Mohammed Samiullah met the Nazim Karachi Syed Mustafa Kamal at his office on Thursday and made the offer and said for this purpose it has a budget of 200 million euros.

He said if tax incentive is given by the Federal Government and proper routes allotted in Karachi, the company will bring 1200 new buses on road in the next 2 years.

Welcoming the offer, Mustafa Kamal said that all possible steps would be taken to bring transport culture in line with the international standard.

In future, he informed, CNG buses would be introduced in Karachi and city government is developing infrastructure suiting such buses.

He said CNG stations are being established and terminals being constructed so that investors may not face any problems.

The world over, he pointed out, preference is being given to CNG buses and major manufacturers are producing such buses. Therefore the companies investing in transport sector should focus on bringing CNG buses.

He said the government has already given permission to bring 8,000 CNG buses over the next 4 years and the companies investing in this sector will not have to pay mark up on bank loans.

He said that introduction of large size modern buses will bring a positive change in the transport culture.

He assured that city government will provide clean environment and profitable routes to investors.

Mustafa Kamal said that a number of companies have contacted the city government for making investment in the transport company, and the one coming first to invest will prove to be more beneficial.

 

[Neo]

Pakistan to take over as G-77 chairman at UN in January


Islamabad, Oct 6: Pakistan will take over the chairmanship of the Group of 77 and China at a special ceremony in January 2007, its Ambassador to UN Munir Akram has said.

It was unanimously elected to head G-77 and China at a ministerial-level meeting of the group last month after its endorsement by the Asian Group.

Foreign Minister Khurshid Mahmood Kasuri will go to New York for the January ceremony when Pakistan takes over the chairmanship from South Africa, the current chairman, state-run APP news agency reported today.

Akram said 2007 would be an important year for developing countries as key issues and follow ups on some of the recommendations of the 2005 summit of world leaders would come up.

The G-77 would also begin consultations with the new UN secretary-general as he works to formulate his policies for the management of the organisation, he said.

It is the fourth time in the group's history that Pakistan would lead it since its inception in 1964. The group is a loose coalition of developing nations which promotes the collective economic interests of its members. There were 77 founding members, but now the organisation has expanded to include 132 members.

 

[Owais]

Iranian ban on Basmati rice may cause $80 million loss


LAHORE (October 07 2006): The Rice Exporters Association of Pakistan (Reap) has expressed grave concern over temporary ban imposed by Iran on import of Basmati rice from Pakistan. Najaf Shah, member, managing committee and former Reap chief, expressed this concern while addressing a press conference here, on Friday.

Among others, Mian Haroon Rashid and Taimur Gill were also present on the occasion. Najaf asked the government to immediately take up the matter with the Iranian diplomat in Pakistan. He added Iran has placed a two-month ban on Basmati rice from Pakistan due to good domestic crop.

He averred the government should take all stakeholders into confidence and evolve an integrated strategy to tackle the situation. He warned share of the Pakistani rice could be reduced substantially if remedial measures were not taken. He expressed the fear that around $70-80 million loss was expected due to the ban. Besides, price of paddy would be decreased in the local market, he added.

He feared any delay in action on the issue could deprive the country of huge foreign exchange. He said the government should get the Minimum Export Price of rice implemented to help the country earn more and more foreign exchange.

"It should also impose a ban on Document against Acceptance (DA), as it is also badly hitting the Pakistani exports; recently a few Pakistani exporters had to face a loss of over Rs 70 million under this trade system," he added.

He was of the view the government should facilitate people to freely move between the two countries in connection with trade and cultural activities. He pointed out one-year visa fee to Iran is Rs26,000, which is almost transportation cost of three shipments. He urged the government to start the diplomatic dialogue with Iranian government to resolve the issue.

The Reap representative stressed the need to implement recently enforced Preferential Trade Agreement (PTA) with Iran in letter and spirit. They said an early resolution of the issue could help Pakistan maintain its share in Iran's rice market.

 

[Owais]

World Bank accuses government of protecting refineries

ISLAMABAD (October 07 2006): The World Bank has accused that Pakistan's inter-government arrangements were allowing refineries to charge from the consumers on petroleum products more than what they actually consume. The report has shown that the refining policy tailored by Petroleum Ministry was facilitating the refineries to tax the consumers and get undue benefits.

The bank made this stunning disclosure in its report on Pakistan's different sectors of economy. It covered Privatisation, Petroleum, Oil and Gas Regulatory Authority and other players' role in pricing and Pakistan's indigenous gas resources demand and supply situation. The report, prepared by its energy sector review mission, which recently visited Pakistan, was submitted to all relevant ministries and departments.

The report called the government of Pakistan policy of protecting refineries through tax exemptions as irrational and recommended it to do away with this mechanism as early as possible. It said: "The refineries are protected through a 5-10 percent import duty, as a result of which consumers are being asked to pay correspondingly higher charges for the products they consume."

The report said that with Parco refinery's exemption, to which inter-government agreements apply, there is little rationale to protect the other refineries, which are for the most part old and depreciated. Sources said the Petroleum Ministry discussed the contents of the report with the heads of refineries early this week. Petroleum Secretary Ahmed Waqar chaired the meeting.

Sources said the refineries' chief executives disagreed with the World Bank's report. They rather demanded increase in their profit/margin to make their business in Pakistan more thriving. Under the existing arrangements, refineries get 10 percent deemed duty on HSD, light diesel oil, kerosene and JP-4. Pakistan has five refineries with 9 to 10 million tons refining capacity.

The World Bank also questioned various other issues relating to refining and made suggestions to the government for improvement in this area. The use of diesel having high sulphur content was one of them, and charging the public for premium quality diesel having 0.5 percent sulphur. The differential in price between the two kinds of diesel is about $20 per ton. Pakistan's total diesel consumption is around 8 million tons per annum.

Pakistan still allows the use of diesel 10,000 ppm (1 percent) sulphur, notwithstanding the environmental consequences, and the low quality of air in cities such as Karachi and Lahore.

The government issued a circular to the refineries in July 2006 to switch to Euro II Diesel (2,500 ppm) by January 2008. The industry considers that this does not allow them sufficient lead time to carry out necessary feasibility studies and, subsequently, execute the subject works (and could only complete those around 2008-11).

 

[Owais]

Rs 2.484 billion subsidy for KESC approved



ISLAMABAD (October 06 2006): The federal government has approved Rs 2.484 billion subsidy for the Karachi Electric Supply Corporation (KESC) to keep consumers- end tariff unchanged. A senior official in the Ministry of Water and Power told Business Recorder here on Thursday that the government would notify 28.08 paisa per unit increase in tariff, but it would not be passed on to the consumers.

The official said that Nepra had given a multi-year tariff formula for seven years to KESC in September 2002 but the tariff was being revised quarterly to adjust the fuel price and cost of power purchase from IPPs and public sector generation companies. Besides, it allows adjustment of O & M cost on CPI basis.

The government has not been passing on the tariff adjustments to consumers, allowed by Nepra to KESC from July 2004 to July 2006 to provide relief to the public and in this regard an amount of Rs 11.891 billion has been given to the utility as subsidy, he added.

The regulator had forwarded adjustment raising KESC tariff by paisa 28.08 per unit for the period April-June, 2006 to be made effective from July 01, 2006 for all categories of consumers except the lifeline consumers on account of fuel price adjustment (paisa 24.30) and CPI Indexation (paisa 3.78).

The official further said the ministry had proposed that in case the tariff adjustment determined by Nepra for the quarter April-June of 2006 ie, 28.08 paisa per unit is not passed on to the consumers GoP has to bear an additional tariff subsidy of Rs2.484 billion.

"We had recommended that increase in fuel price adjustment determined by Nepra should not be passed on to the consumers and absorbed through payment to KESC by GoP till such time that the GoP decides to increase consumer tariff," the official maintained. The Economic Co-ordination Committee (ECC) of the cabinet discussed the issue in detail, in its previous meeting wherein it was decided that the government would absorb raise in tariff.